Ann Miletti, senior portfolio manager for the private market value equity approach at Wells Fargo Asset Management discusses navigating U.S. tax reform, M&A, and earnings.

Laurie King: I’m Laurie King, and you are listening to On the Trading Desk®.

Following a company like you own a company uncovers interesting insight. That nuance is how Ann Miletti, senior portfolio manager for the private market value equity approach at Wells Fargo Asset Management, navigates the markets for investors as her team tracks U.S. tax reform, merger and acquisition activity, and earnings.

You might have seen Ann in our 2018 Midyear Investment Insights video: Expand, Adjust, Adapt. If you haven’t, we encourage you to view the video on iTunes and download our full report at

Ann expanded her insights, going deeper into what’s influencing the equity markets from her perspective, especially as catalysts for growth in the U.S. are expanding.

On the back of U.S. tax reform, we’ve seen forecasts that indicate a shift toward capital spending, and here, Ann Miletti explains the significance.

Ann: The significance of the shift is enormous. And the reason for it is, when companies shift away from just paying dividends and buying back stock and put money to work in the economy through cap-ex spending, it really helps the overall economy grow, which is good for the market as well.

Laurie: We also expected merger and acquisition activity to pick up in the U.S. Ann explains what’s driving M&A.

Ann: I think it has a little bit to do with repatriation. There’s a lot of money coming back to the U.S., and that money is being spent paying down debt, a little bit toward cap-ex, and more M&A happens. When M&A really picks up, there’s more competition for deals, the prices are generally better, so sellers are more willing to sell. But buyers are also out there in force, because they’re looking for more ways to grow. And more importantly—there’s just more capital available, which really fuels M&A overall. It doesn’t always turn out to be great, and so you have to very carefully assess those deals.

Laurie: And that’s just what Ann Miletti’s investment team does—they very carefully assesses companies with what they call a private market value approach.

Ann: Which means we assess every company as if we were the buyer of the asset. And so we have private market values for all of our companies. And then when one of our companies is going out to make an acquisition, we really know how to assess that deal that they just did. And we can make an initial assessment about what we think they paid, whether or not we think it fit, and how well we think the management can integrate that deal into their own portfolio.

Laurie: Following companies like they own the companies may lead to identifying good news for stocks they own, but it may also lead to identifying the need to sell.

Ann: It may. It may get us excited about the opportunities that this management team created, but we have seen times where a management team has overpaid—based on what we believe and based on the knowledge we have at the time. And that causes us to, sometimes, sell a stock.

Laurie: That’s Ann’s view of companies who are doing the acquiring, who are on the buy-side of M&A activity. But they pay close attention to other stocks that they own for their prospects of being acquired.

Ann: Obviously, that’s a good thing for us, because when a company is acquired, it acknowledges the fact that somebody else thought it was an attractive asset as well. And so very often there is a premium paid. It benefits our shareholders, which is important for us to see. It really helps reaffirm that private market value process itself.

Laurie: In addition to a company’s private market value, earnings send signals to the team.

Ann: The thing about earnings is it really centers around expectations—what people expected the company to do and what they actually produced, whether they meet that, beat that, or miss those earnings. And for us, we have a set of expectations, and we do our own assessment after each company announces earnings, and we determine whether or not it was reasonable, and if they missed, we want to understand why.

Laurie: We asked Ann who was the tougher critic of a company’s earnings report … the Street or her private market value equity team.

Ann: I would say, ummm, I would say the Street’s a little more emotional, and it’s because it’s natural for emotion to drive stock prices. And if you look at what happens on days where companies announce earnings, stocks move pretty dramatically. They’re pretty volatile when a company misses or when a company beats expectations. And if I think about it as a buyer of a company, really thinking about private market value, it doesn’t necessarily mean that a company’s value went up 10% or down 10% on a day they announced earnings. And so what our process tries to do is eliminate that emotion. What we try to do is focus on the details underneath the earnings—what caused that beat, or that miss, if that’s what happened—and then make a determination about what to do.

Laurie: Let’s end this episode up on that note and thank Ann Miletti for her insights. Learn more about her team and their private market value approach by visiting

Until next time; I’m Laurie King, take care.



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